Abstract
International Financial Reporting Standards (IFRS) 15, the new revenue standard, was
issued to improve the reporting of the revenue figure. IFRS 15 was expected to have
a greater impact on the telecommunications industry than on other industries due to
the nature of the industry which created practical challenges in implementing IFRS 15
in the telecommunications environment. Companies within this sector expressed
numerous concerns with the implementation of this standard. This raised the question
of whether entities in the telecommunications industry have been able to appropriately
apply the IFRS 15 disclosures in the first year of adoption due to the extensive
disclosure requirements, lack of resources and a tight deadline for implementation of
the new revenue standard. The objective of this research was to identify whether the
application of the IFRS 15 revenue disclosures by international telecommunications
entities in the first year of adoption was appropriate, with specific emphasis on areas
where there were excellent, incomplete, or inconsistent disclosures.
A qualitative research methodology, supported by quantitative assessments, was
used to conduct this study. A thematic content analysis was performed on the annual
financial statements of selected listed international telecommunications companies
applying IFRS. Themes were identified from documented concerns and comprise of
the identification of the performance obligations in the contract; the determination of
the transaction price and the amounts allocated to performance obligations; the
significant financing component; the timing of revenue recognition; contract costs;
contract balances; disaggregation of revenue; and, lastly, transition and practical
expedients. A checklist, based on these themes, was developed to use as a measure
against which to assess the disclosures of the telecommunications companies
selected for review in this study. The checklist consists of the qualitative
considerations as required by IFRS 15.
The existence and quality of the specified disclosures were evaluated against the
checklist using relevant scales. The existence of the disclosures was tested against a
nominal scale. The quality of the disclosures provided was measured on an ordinal
v
scale with excellent, good and unsatisfactory ratings. The results were subsequently
analysed and interpreted.
This research found that, overall, the disclosure requirements in IFRS 15 were
appropriately applied. However, there are areas where improvement is needed. This
includes the disclosure of the determination and allocation of the transaction price, as
well as the recognition of contract costs. The disclosure of the disaggregation of
revenue was found to be excellent in many of the financial statements reviewed.
Accounting policies were often incomplete, specifically those relating to the significant
financing component. There was inconsistency in the disclosure of the portion of the
transaction price amount that is allocated to the remaining performance obligations at
the end of the reporting period.
KEY WORDS
IFRS 15; revenue from contracts with customers; revenue recognition;
telecommunications industry; disclosures.